Background Information on Payment Methodologies and Benefit Design

The Urban Institute has issued two new papers with background information on health care payment methodologies and the design of health care benefits packages.

The first paper, Payment Methods: How They Work, describes nine payment methodologies:

  • fee schedules
  • primary care capitation
  • per diem payments to hospitals for inpatient visits
  • DRG-based payments to hospitals for inpatient visits
  • global budgeting for hospitals
  • bundled payments
  • global capitation for organizations
  • shared savings
  • pay for performance

The second paper, Benefit Designs: How They Work, explains seven different types of benefit designs:

  • value-based design
  • high-deductible health plans
  • tiered networks
  • narrow networks
  • reference pricing
  • centers of excellence
  • benefit design for alternative sites of care

urban institute 2A third paper, Matching Payment Methods with Benefit Designs to Support Delivery Reforms, describes how to match benefit designs with payment methods.

Go here to find Payment Methods: How They Work.

Go here to find Benefit Designs: How They Work.

And go here to find Matching Payment Methods with Benefit Designs to Support Delivery Reforms.

Safety Net Still Needed, Study Finds

Despite Affordable Care Act policies that have enabled millions of Americans to obtain health insurance, the health care safety net is still needed.

Or so concludes a new report from the Georgetown University Health Policy Institute’s Center on Health Insurance Reforms.

For the report A Tale of Three Cities: How the Affordable Care Act is Changing the Consumer Coverage Experience in 3 Diverse Communities, researchers visited and examined conditions in Tampa, Columbus, and Richmond (Virginia), and among their conclusions was:

We still need a safety net. Safety net programs in existence before the ACA were expected to become less necessary once the ACA coverage expansions took effect. And to some extent that has indeed been the case. But what was deemed affordable under the ACA for those with income too high for Medicaid eligibility is not necessarily perceived to be affordable to the individuals enrolling in the marketplace plans, particularly when health care spending must compete with other pressing household expenses. As a result, safety net providers report that many patients who start the year with coverage return to them later in the year uninsured.

Happy medical team of doctors togetherThe report also found that

Safety net providers are adapting to the new coverage and health system landscape ushered in by the ACA. However, there’s not yet enough data to know whether coverage has translated to better, more affordable access to health care services.

To learn more about the report and its findings, go here to read a Center on Health Insurance Reforms blog entry on the research and go here to see the report itself.

New Medicaid Enrollees Cost Less to Serve

Contrary to fears that the long-time uninsured who became eligible for Medicaid under Affordable Care Act eligibility expansion would turn to providers with a long litany of expensive-to-treat medical problems, preliminary data suggests that such individuals are actually less costly to treat than the average Medicaid recipient.

Preliminary data released by the Centers for Medicare & Medicaid Services based on claims data from the first quarter of 2014 – the first time period after Medicaid expansion began in some states – found that the average new adult Medicaid enrollee cost $4513 to serve, as opposed to the $7150 it cost to serve Medicaid beneficiaries across all groups.

kaiserThe Kaiser Family Foundation has done a great deal of analysis of early data under Medicaid expansion, looking at costs per beneficiary, geographic data, Medicaid expansion states, enrollment changes, and more. Find its extensive analyses here in the report “Medicaid Expansion Spending and Enrollment in Context: An Early Look at CMS Claims Data for 2014.”

OIG Reveals 2016 Plans

The U.S. Department of Health and Human Services’ Office of the Inspector General (OIG) has published its work plan for the 2016 fiscal year.

In 2016, the OIG will continue to examine all aspects of HHS endeavor, including Medicare, Medicaid, hospital services, public health activities, and more. In the coming year it will continue a number of hospital-focused projects while also focusing more on health care delivery, health care reform, alternative payment methodologies, and value-based purchasing initiatives.

hhsOIGAmong the OIG’s planned Medicare projects in 2016 – some of them continued from the past and some of them new, quoted directly from the work plan – are:

  • Hospitals’ use of outpatient and inpatient stays under Medicare’s two-midnight rule. We will determine how hospitals’ use of outpatient and inpatient stays changed under Medicare’s two-midnight rule, as well as how Medicare and beneficiary payments for these stays changed, by comparing claims for hospital stays in the year prior to the effective date of the two-midnight rule to stays in the year following the effective date of that rule. We will also determine the extent to which the use of outpatient and inpatient stays varied among hospitals.
  • Analysis of salaries included in hospital cost reports. We will review data from Medicare cost reports and hospitals to identify salary amounts included in operating costs reported to and reimbursed by Medicare. Employee compensation may be included in allowable provider costs only to the extent that it represents reasonable remuneration for managerial, administrative, professional, and other services related to the operation of the facility and furnished in connection with patient care.
  • Medicare oversight of provider-based status. We will determine the number of provider-based facilities that hospitals own and the extent to which CMS has methods to oversee provider-based billing. We will also determine the extent to which provider-based facilities meet requirements described in 42 CFR Sec. 413.65 and CMS Transmittal A-03-030, and whether there were any challenges associated with the provider-based attestation review process. Provider-based status allows facilities owned and operated by hospitals to bill as hospital outpatient departments. Provider-based status can result in higher Medicare payments for services furnished at provider-based facilities and may increase beneficiaries’ coinsurance liabilities. The Medicare Payment Advisory Commission (MedPAC) has expressed concerns about the financial incentives presented by provider-based status and stated that Medicare should seek to pay similar amounts for similar services.
  • Comparison of provider-based and freestanding clinics. We will review and compare Medicare payments for physician office visits in provider-based clinics and freestanding clinics to determine the difference in payments made to the clinics for similar procedures and assess the potential impact on Medicare of hospitals’ claiming provider-based status for such facilities. Provider-based facilities often receive higher payments for some services than do freestanding clinics.
  • Review of hospital wage data used to calculate Medicare payments. We will review hospital controls over the reporting of wage data used to calculate wage indexes for Medicare payments. Prior OIG wage index work identified hundreds of millions of dollars in incorrectly reported wage data and resulted in policy changes by CMS with regard to how hospitals reported deferred compensation costs.
  • Inpatient rehabilitation facilities—adverse events in postacute care for Medicare beneficiaries. We will estimate the national incidence of adverse and temporary harm events for Medicare beneficiaries receiving postacute care in inpatient rehabilitation facilities (IRFs). We will also identify factors contributing to these events, determine the extent to which the events were preventable, and estimate the associated costs to Medicare.
  • CMS validation of hospital-submitted quality reporting data. We will determine the extent to which CMS validated hospital inpatient quality reporting data.
  • Ambulatory surgical centers—payment system. We will review the appropriateness of Medicare’s methodology for setting ambulatory surgical center (ASC) payment rates under the revised payment system. We will also determine whether a payment disparity exists between the ASC and hospital outpatient department payment rates for similar surgical procedures provided in both settings.
  • Use of electronic health records to support care coordination through ACOs. We will review the extent to which providers participating in ACOs in the Medicare Shared Savings Program use electronic health records (EHRs) to exchange health information to achieve their care coordination goals. We will also assess providers’ use of EHRs to identify best practices and possible challenges to the exchange and use of health data, such as degree of interoperability, financial barriers, or information blocking.
  • Accountable Care Organizations: Strategies and Promising Practices. We will review ACOs that participate in the Medicare Shared Savings Program (established by section 3022 of the Affordable Care Act). We will describe their performance on the quality measures and cost savings over the first three years of the program and describe the characteristics of those ACOs that performed well on measures and achieved savings. In addition, we will identify ACOs’ strategies for and challenges to achieving quality and cost savings.

Among the Medicaid projects the OIG will undertake, again presented in language taken directly from its work plan, are:

  • Transportation services—compliance with Federal and State requirements. We will determine the appropriateness of Medicaid payments by States to providers for transportation services.
  • Health-care-acquired conditions—prohibition on Federal reimbursements. We will determine whether selected States made Medicaid payments for hospital care associated with health-care-acquired conditions and provider-preventable conditions and quantify the amount of Medicaid payments for such conditions.
  • State use of provider taxes to generate Federal funding. We will review State health-care-related taxes imposed on various Medicaid providers to determine whether the taxes comply with applicable Federal requirements. Our work will focus on the mechanism States use to raise revenue through provider taxes and determine the amount of Federal funding generated.
  • State compliance with Federal Certified Public Expenditures regulations. We will determine whether States are complying with Federal regulations for claiming Certified Public Expenditures (CPEs), which are normally generated by local governments as part of their contribution to the coverage of Medicaid services.
  • Reviews of State Medicaid Fraud Control Units. We will continue to conduct in-depth onsite reviews of the management, operations, and performance of a sample of MFCUs. We will identify effective practices and areas for improvement in MFCU management and operations.
  • Medicaid managed care reimbursement. We will review States’ managed care plan reimbursements to determine whether MCOs are appropriately and correctly reimbursed for services provided.
  • Medicaid managed care entities’ identification of fraud and abuse. We will determine whether Medicaid MCOs identified and addressed incidents of potential fraud and abuse. We will also describe how States oversee MCOs’ efforts to identify and address fraud and abuse.
  • HRSA—duplicate discounts for 340B-purchased drugs. We will assess the risk of duplicate discounts for 340B-purchased drugs paid through Medicaid MCOs and describe States’ efforts to prevent them.

To learn more about the OIG’s plans in 2016, go here to see the document Work Plan Fiscal Year 2016.

States to Have New Reform Tool

Come 2017, states will have a new tool at their disposal through which to pursue health care reform.

commonwealth fundAt that time, states will be able to seek new state innovation waivers from the federal government that will enable them to change covered benefits and insurance subsidies; replace health insurance exchanges; modify the individual or employer mandate; and do other things so long as their efforts ensure continued access to comprehensive and affordable health insurance. The waivers, created under the Affordable Care Act, are good for five years.

The Commonwealth Fund has published an issue brief that explains the section of the Affordable Care Act that includes state innovation waivers and outlines how states might use innovation waivers to customize health care reform for their own residents. Find that issue brief here.

Looking at Payment and Delivery System Reform

Last fall the Robert Wood Johnson Foundation brought together grant recipients and national experts to talk about health care payment and delivery system reform design and implementation issues.

rwjfNow, the foundation has released a brief paper that addresses what the experts consider to be the three greatest challenges in the pursuit of such reform:

  • aligning alternative payments with clinician compensation
  • considering social determinants of health in payment reform models
  • repurposing hospital resources

The paper also takes a look at whether health care payments should be subject to risk adjustment to reflect the social and economic barriers to better health and care that some patients face. The National Association of Urban Hospitals (NAUH) has long advocated such risk adjustment in Medicare payments and has endorsed legislation to compel Medicare to introduce such a policy change, including the Establishing Beneficiary Equity in the House Readmissions Program Act of 2015, which was introduced in both the House and the Senate last month.

These issues and more are addressed in greater detail in the new paper “Three Emerging Challenges for Sustained Payment and Delivery System Reform,” which can be found here.

Readmissions and Quality: Are They Related?

A new study casts doubt on a major principle underlying a good deal of recent federal health care policy.

That principle holds that hospitals that have lower rates of 30-day readmissions of Medicare patients provide better, more economical care than those with higher readmission rates.

But that may not be true.

According to an examination of the performance of safety-net hospitals in California published in the journal Health Affairs, those safety-net hospitals are more likely than others to be penalized by Medicare’s hospital readmissions reduction and value-based purchasing programs.

iStock_000008112453XSmallAt the same time, however, these same hospitals had lower 30-day, risk-adjusted mortality rates for patients treated for myocardial infarction, heart failure, and pneumonia.  The safety-net hospitals also had marginally lower adjusted Medicare costs.

The National Association of Urban Hospitals has long been concerned about the bias of value-based purchasing and readmissions reduction programs against safety-net hospitals because of the more challenging patients those hospitals serve and has supported legislation to add a risk-adjustment component to such programs.

Find out more about the findings of the study “California Safety-Net Hospitals Likely to be Penalized by ACA Value, Readmission, and Meaningful-Use Programs,” which can be found here, on the web site of the journal Health Affairs.

Protect Hospitals From Medicare DSH Cuts, NAUH Asks Congress

Protect private safety-net hospitals from Medicare DSH cuts by delaying those cuts, the National Association of Urban Hospitals asked Congress yesterday.

In a message to every member of Congress, NAUH observed that the Affordable Care Act-mandated requirement to reduce Medicare disproportionate share hospital payments (Medicare DSH) in anticipation of more people getting health insurance and hospitals providing less care to the uninsured was thrown off balance by the decision of many states not to expand their Medicaid programs in the wake of the Supreme Court decision making that expansion optional.

NAUH LogoPrivate safety-net hospitals are already struggling to accommodate an outsized proportion of the $270 billion in  Medicare payment cuts imposed on hospitals in recent years, NAUH wrote.  That burden is now being exacerbated because in the absence of direction from Congress on how to adjust Medicare DSH cuts to reflect this change, the Centers for Medicare & Medicaid Services (CMS) is making the cuts required in the 2010 health reform law.

NAUH asked Congress to provide that direction to CMS, which administers the Medicare program.

Private safety-net hospitals need to be protected from these cuts, which threaten to destroy their ability to care for their vulnerable patients and jeopardize the ability of some to continue fulfilling their vital role in the American health care safety net.

See NAUH’s complete message to Congress here.

Medicare Payment Rule FY 2015: Inpatient Rates to Rise 1.4 Percent

Medicare inpatient rates will increase 1.4 percent in FY 2015.

But the already-shrinking Medicare disproportionate share (Medicare DSH) pool will be $900 million smaller than proposed in April.

These and other payment policies were included in the recently unveiled Medicare inpatient prospective payment system regulation for FY 2015.

law booksThe new regulation, to be published shortly in the Federal Register, also addresses changes in Medicare’s value-based purchasing program, hospital readmissions reduction program, and outlier threshold and introduces Medicare’s new hospital-acquired conditions program and changes in hospitals’ Medicare area wage indexes.

The National Association of Urban Hospitals (NAUH) has prepared a summary of the new regulation tailored to the interests of private safety-net hospitals and can provide projections detailing the anticipated impact of all of these changes on individual private safety-net hospitals.  To receive a copy of this memo, hit the “contact us” link in the upper right-hand portion of this screen.  To see the regulation itself go here and for a Reuters report on the regulation go here.

Foundation to Track Effect of ACA on Hospitals

The Robert Wood Johnson Foundation has launched a project to measure the impact of the Affordable Care Act on hospitals.

Working with 24 state hospital associations, the foundation’s Hospital ACA Monitoring Project will collect quarterly hospital data on admissions, emergency room visits, and selected diagnoses and procedures.  The project will collect data from different types of hospitals with different payer mixes.

RWJFAccording to the foundation, the project “is designed to shed light on some of the effects of health reform on hospitals and provide extremely timely data to researchers, policymakers and hospital leaders.”

Learn more about the Robert Wood Johnson Foundation’s Hospital ACA Monitoring Project from this notice on the foundation’s web site.